Education Loan for Abroad Studies

All you need to know about education loans for studying abroad

Anam Shams is a seasoned professional in the study abroad field with deep knowledge of admissions and loans. With a passion for helping aspiring students fulfill their academic dreams, Anam...

Study Abroad Expert

Reviewed By: Aman

Aman Jain graduated from IIT Kanpur, and currently functions as the CMO at GyanDhan. He is deeply passionate about creating equality in higher education and has directly interacted with 2 Lakh...

What are education loans?

An education loan is a financial aid that students apply for to fund their studies abroad. Different banks and financial institutions offer these loans at competitive interest rates, making quality education more affordable for students.

Studying at renowned universities, especially abroad, opens doors to numerous opportunities. However, the cost of such education can be substantial. To bridge the financial gap, education loans for studying abroad become invaluable, enabling students from all backgrounds to pursue their dreams at top-tier institutions across the globe.

With various banks and lenders providing student loan for abroad, choosing the right option can be overwhelming. This is where GyanDhan comes in as a guiding light. We help students find the best education loan for their study abroad needs, tailored to their unique profiles, ensuring a seamless and hassle-free loan approval process.

Types of Education Loans for Abroad Studies

Education loans are of two types, one that is taken with collateral i.e. a secured loan and one taken without collateral i.e. an unsecured loan. You need to understand the difference between the two before choosing the one that is right for you.

Secured education loan

Requires the borrower to offer any collateral like immovable property, FD, Insurance Policy etc. against which the loan is offered.
Lower rate of interest.
The chances of approval are high.
Longer repayment period.
A higher loan amount can be availed.
No repayment during the study period.
Parental income is not required for approval.

Unsecured education loan

The borrower does not need to offer any collateral to get this loan.
Higher interest rate, usually 1.5% - 4% higher than the secured loan.
Is a more risky proposition for the bank, hence is not so easy to obtain a loan without collateral from the bank.
Comparatively shorter repayment period.
Some repayment during the study period.
Parental income is required for approval.

Types of Lenders Offering Education Loans for Abroad Studies

When considering student loans for studying abroad, you have three main categories of lenders to choose from: banks, Non-Banking Financial Companies (NBFCs), and international lenders. The lending choices within each category are as follows:

Banks: Traditional financial institutions that offer education loans to students pursuing studies abroad and are further divided into public and private banks.
NBFCs: Non-Banking Financial Companies are financial institutions that offer various financial services similar to traditional banks but operate without a banking license.
International Lenders: Financial entities based outside your home country that specialize in offering international education loan for international students.

Key Features of Education Loan for Abroad Studies

Criteria	PSB	Private Banks	NBFCs	International Lenders
Best known for	Secured loans	Unsecured and secured loans	Unsecured loans	Unsecured without co-applicant
Popular choices	SBI, UBI, and BOB	Axis, ICICI, and IDFC	HDFC Credila, Avanse, InCred. And Auxilo	MPOWER and Prodigy
Interest rate	Starting at 9.8%	Starting at 10.85%	Starting at 11.25%	Starting at 11.00%
Maximum loan amount*	INR 1.5 Cr	INR 50 Lakh	INR 75 Lakh	100,000 USD
Margin money*	10 - 15%	0 - 10%	Nil	Nil
Repayment tenure*	Up to 15 years	Up to 15 years	Up to 20 years	Up to 15 years
Repayment options	Free or SI	PSI, SI or EMI	SI or EMI	SI
Processing time*	10-15 days	5-7 days	5-7 days	5-7 days
Financial co-applicant required*	No	Yes	Yes	No
Tax benefit*	Yes	Yes	Only HDFC Credila	No

SI - Simple Interest; PSI - Partial Simple Interest; EMI - Equated Monthly Installment

Eligibility For Education Loan for Abroad

Education loan abroad eligibility is straightforward but it can vary for different lenders. The general eligibility criteria to get a student education loan for study abroad are listed below -

Nationality: Must be an Indian citizen.
Admission: Secured admission through merit or entrance tests.
Course Type: Enrolled in career-oriented courses (UG/PG).
Academic Performance: At least 50% marks in the last qualifying exam.
Collateral: For secured loans, collateral might be required.
Co-applicant: For unsecured loans, a co-applicant with a strong financial background may be necessary.
University and Course Reputation: Factor in loan approval.

Documents Required for Education Loan for Abroad Studies

Education loan requ ired documents vary from lender to lender and also depend on the type of education loan applied for. Here’re the general documents required by almost every lender:

KYC documents

PAN card
Driving license
Aadhar card

Address proof

Aadhar card
Valid water/electricity/ LPG Bill
Voter’s ID card
Current house lease agreement
Valid passport

Academic record documents (From Applicant)

10th result
12th result
Proof of admission
Under graduate result semester wise (If required)
Entrance exam result - abroad institutes (GRE, GMAT, TOEFL, IELTS etc.)

Financial Documents from the Co-applicant

For salaried co-applicant

Salary slips of the last 3 months
Copy of Form 16 for last 2-3 years or copy of IT Returns for last 2-3 financial years, acknowledged by Income Tax Dept.
Bank account statement for the last 6 months (salary account).

For Self-employed co-applicant

Business address proof (If Applicable)
TDS certificate (Form 16A, if applicable)
Last 3 years ITR
Certificate of qualification (for C.A./ Doctor and other professionals)
Bank account statement for the last 6 months

Technical Documents for Collateral

Approved layout plan and permissions (if applicable)
NOC and allotment letter
Possession certificate (if applicable)
Copy of prior sale deeds
Conversion certificate where the property has changed from agricultural to non-agricultural use
Urban clearance certificate

Legal Documents for Collateral

Sale/gift/partition deed
Khata certificate and extract
Encumbrance certificate (EC)
Latest property tax receipt

Best Lenders to Get an Education Loan for Abroad Studies

A comprehensive comparison of some of the best lenders offering education loans is tabulated below in order to find the best education loan for abroad studies. Detailed information on each lender’s loan amounts, interest rates, moratorium periods, and other essential factors is provided, enabling you to make informed decisions.

Public Banks

Basis of difference	UBI	SBI
Loan amount (unsecured)	Up to INR 40 Lakh	Up to INR 7.5 Lakh
Interest rate	Starting at 9.8%*	Starting at 11.15%*
Moratorium period	Course + 12 months	Course + 6 months
Processing fees	No processing fee	10,000 INR + GST
Processing time	Up to 7 days	Up to 14 days
Unsecured loan eligibility	Only for masters program	N/A
Premiere institute list	Have a list that can lead to fluctuation in interest rate	N/A
Loan Approval Basis GRE / GMAT?	No	No

*Interest rate as of August 2023

Private Banks

Basis of difference	IDFC First Bank	ICICI Bank	Axis Bank
Maximum loan amount	Secured loans - INR 1 cr, Unsecured loans - INR 75 Lakh	Secured loans - INR I cr, Unsecured loans - INR 40 Lakh	Up to INR 40 - 75 Lakh
Interest Rate	11.50 - 12.25%	9.85 - 15.5%	11 - 11.5%
Margin Money	Nil	0 - 15%	0 - 5%
Processing fees	1 - 1.25%	0.5 - 2%	0.75% of the loan amount + GST
Moratorium period	Course period + 12 months	Course period + 6 months	Course period + 1 year
Repayment during the course duration	Simple or Partial Interest	Simple Interest (SI)	Simple Interest (SI)
Loan tenure	12 years	8-12 years	15 years
Co-applicant minimum income	INR 35,000 / per month	INR 60,000 / per month	INR 35,000 / month
Co-applicant age	32 years	35 years
Pre-approved college lists	Colleges and universities are divided into three categories i.e. Platinum, Titanium, and Gold	Colleges and universities are divided into four categories i.e A1, A1, A3 & A4
Loan approval basis GRE / GMAT?	Yes	No	Yes

*Interest rate as of August 2023

NBFCs

Features	HDFC Credila	Avanse	Auxilo	InCred
Maximum loan amount	INR 20 - 75 Lakh	INR 20 - 75 Lakh	INR 20 - 75 Lakh	INR 20 - 80 Lakh
Interest rate*	11.25 - 13%	12.25 - 14%	12 - 13.25%	11.65 - 13.5%
Moratorium period	Course period + 1 year	Course period + 1 year	Course period + 1 year	Course period + 1 year
Repayment during the moratorium period	Simple Interest (SI) or partial Simple Interest (PSI)	Simple Interest (SI) or partial Simple Interest (PSI)	Simple Interest (SI) or partial Simple Interest (PSI)	Simple Interest (SI) or partial Simple Interest (PSI)
Processing fee	0.5 - 1.5% of the loan amount + GST	1 - 2% of the loan amount + GST	0.5 - 1.5% of the loan amount + GST	0.5 - 1% of the loan amount + GST
Loan tenure	12 - 15 years	12 - 15 years	12 - 15 years	12 - 15 years
Maximum Loan Amount	INR 20- 75 Lakh	INR 20- 75 Lakh	INR 20- 75 Lakh	INR 20- 80 Lakh
Margin Money	Nil	Nil	Nil	Nil
Minimum co-applicant income (negotiable for secured education loans)	INR 30,000 - 60,000	INR 30,000 - 60,000	INR 20,000 - 40,000	INR 20,000 - 40,000

*Interest rate as of August 2023

How Do I Apply for an Student Loan for Abroad?

Applying for student loans India studies abroad can be quite simple if done carefully. To help you answer the question, 'How do I get an education loan for abroad studies?' here are some steps that will assist you.

Check eligibility with GyanDhan: GyanDhan evaluates your profile and selects the best lender for you, making it easier to navigate the loan application process.
Discussion with education loan counselor: GyanDhan’s education loan counselor will connect with you and help you understand all about foreign education loans and your chosen lender. The counselor will also provide you with a document checklist as well.
Document submission & verification: GyanDhan streamlines the document submission process by offering doorstep pickup or a customized checklist for online uploads. Once submitted, they manage all remaining formalities and collaborate with the lender to verify your documents efficiently.
Loan approval & disbursement: When all the documents are verified, you will get a loan approval letter and an agreement to sign. Once all this has been done you can take the loan disbursement as per your convenience.

How to Choose the Best Overseas Education Loan?

Interest Rate

Even a 1% increase in the education loan interest rate has a substantial financial effect. Example - Loan Amount: INR 30 lakh, Loan Repayment in 5 years after you graduate, Course Duration: 2 years; While at 10%, you’ll pay INR 9.7 lakh in interest, at 11%, you’ll pay INR 10.9 lakh - that’s a difference of INR 1.2 lakh for just 1%! Also, historical changes done by any lender in its interest rates should also be considered.

Interest Rate Discount

These are offered by lenders to borrowers as a means to reduce the overall cost of borrowing. These discounts are usually offered when borrowers meet certain criteria, such as maintaining a good academic record or setting up automatic monthly payments. This is an important factor to consider as this helps to reduce the overall cost to borrow which can be a great relief for you.

Interest Rate in Different Currencies

Often students face the dilemma of choosing over an education loan in USD with a lower interest rate or an equivalent amount in INR with a higher interest rate. To the previous trend of the rising prices of USD to INR conversion rates, it is a smart choice to go for the loan amount in INR even though it may come with a higher interest rate.

Loan Tenure

Repayment tenure or loan tenure refers to the duration of time for which a borrower is required to repay their loan. It is an important factor while making a decision for choosing the lender for you as a shorter loan tenure can help you in saving interest and ultimately a lot of money, but this will lead to higher monthly instalments. In case you cannot bear high monthly installments then you can opt for lenders that have a longer loan tenure.

Tax Rebate

Education loans for foreign studies taken from Indian banks are special in that the entire amount paid as interest is exempt from income tax. This has a huge impact: Example - Loan Amount: INR 30 lakh, Marginal tax bracket: 30%, Repayment in 5 years after graduation, Course Duration: 2 Years, ROI: 10%... If your loan has a tax rebate, you can save INR 2.9 lakh!

Margin Money

The amount that you need to pay from your own pocket while the rest is paid by the bank. If a bank offers a 0% margin, it means they’ll fund all your education expenses in the offered loan amount.

Hidden Charges

1. Forex margin: Some lenders charge a forex conversion charge when the overseas education loan is sanctioned in INR and disbursed in some other currency. This can be as high as 1.5%, which translates to INR 45,000 for a loan amount of INR 30 lakh.
2. Processing fees: This varies from zero to as high as 2%. For a loan of INR 30 lakh, the processing fees can be as high as INR 60,000.
3. Cost of credit life insurance: Some lenders make it mandatory for the applicant to go in for credit life insurance with their education loan scheme so that their loan amount is protected against any unfortunate eventualities. If the premium amount is on the higher side then it eventually increases the cost of the education loan as well.
4. Mandatory cross-sell: Some lenders try to cross-sell other policies before sanctioning the education loan, even though it is not required on the applicant’s end.

Frequently Asked Questions

What determines the interest rate on an education loan?

The interest rate on an education loan is determined by various factors, including the applicant's creditworthiness, co-applicant's financial profile, loan amount, loan tenure, type of interest rate (fixed or floating), and the lender's internal policies. Students with a strong credit history and co-applicants with stable financial backgrounds are more likely to secure a lower interest rate.

Define margin money concerning education loans.

Margin money in education loan refers to the portion of the total educational expenses that the borrower needs to finance from their own funds. It is the percentage of the course cost that is not covered by the loan and needs to be borne by the student or their co-applicant. The remaining amount, after deducting the margin money, is financed through the education loan.

How long is the moratorium period for education loans?

The moratorium period for education loans is the time during which the borrower is not required to make any loan repayments. It typically starts from the course completion date and extends for a certain period afterward, allowing the student to focus on finding employment and settling into their new career. The duration of the moratorium period varies among lenders but is usually around 6 to 12 months.

What is the purpose of education loan insurance?

Education loan insurance provides financial protection to the borrower and their family in case of unforeseen events, such as the borrower's untimely demise or permanent disability. This insurance coverage ensures that the loan does not become a burden on the family, as the insurance company settles the outstanding loan amount, allowing the borrower's educational aspirations to be fulfilled even in their absence.

What are the different types of interest rates available for education loan in India for study abroad?

Education loans typically offer two types of interest rates - fixed and floating. In a fixed interest rate, the rate remains constant throughout the loan tenure, providing stability in repayment amounts. On the other hand, in a floating interest rate, the rate fluctuates based on market conditions, potentially leading to varying monthly installments.

What does autopay mean in the context of education loans?

Autopay, in the context of education loans, refers to a convenient payment method where the borrower authorizes the lender to deduct the monthly loan installment automatically from their bank account on a specified date. This automated payment ensures timely repayment and reduces the chances of missing deadlines, helping students manage their loan obligations efficiently.

What is the role of a guarantor in an education loan?

A guarantor plays a significant role in securing a bank loan for study abroad. If the borrower defaults on payment, the guarantor has a legal obligation to repay the loan amount. For loans exceeding INR 4 lakh, the bank may require a third-party guarantee. In these situations, the guarantor becomes liable to repay the entire loan amount to the bank if the borrower fails to do so.

What is the maximum loan limit for foreign study loan?

In secured student loans for studying abroad, one can get up to INR 1.5 cr. In overseas education loans without collateral, students can apply for study loans of up to INR 75 Lakh. This loan amount limit can increase or decrease depending on the applicants and co-applicants profile, country, course, etc.

How can one avail tax benefits on education loans?

In India, under Section 80E of the Income Tax Act, individuals can avail tax benefits on the interest paid on education loans. The entire interest amount paid during the financial year is eligible for deduction without any upper limit. However, the principal amount repayment does not qualify for tax benefits.

Explain the concept of an education loan top-up.

An "education loan top-up" allows borrowers who have an existing education loan to obtain additional funds over and above the original loan amount. This option is beneficial when students require extra financial assistance due to increased educational expenses or unforeseen circumstances. The top-up amount is added to the existing loan, and the borrower continues to repay the combined loan amount as per the agreed terms.

Which are best bank for abroad education loan?

For those seeking secured education loans to study abroad, banks like SBI and UBI are often recommended for their favorable interest rates and terms that require collateral. Conversely, for unsecured loans, which do not require collateral, AXIS, ICICI, and HDFC Credila are popular choices among students for their specialized education loan products. It's advisable to compare these options based on your financial needs and repayment capacity.

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